Where are your narrative reports?
It’s 11:59 on the night before your regulatory reporting deadline. Do you know where your narrative reports are?
Narrative reports—I observed in an earlier blog—are a routine, time-consuming business reality for many organizations. Featuring long descriptive paragraphs of text and numbers, linked to values in tables, charts and graphs, these reports—for example, Comprehensive Annual Financial Reports (CAFRs), and Form 10-K and 10-Q reports for publicly traded companies—invariably require significant organizational resources for completion.
In my career as a financial professional, working with diverse organizations in many sectors, I have encountered two common misconceptions about narrative reports:
- As I have discussed earlier, most organizations grossly underestimate the actual time (and resources) spent on their narrative reporting processes.
- Senior decision-makers are often unaware of the sheer number of narrative reports in their organization, and of the risk entailed in the inefficiencies of their reporting processes.
Inefficiency and risk in narrative reporting
While senior managers often underestimate the amount of staff time required for narrative reporting, it is even more troubling that today decision-makers in many organizations are denied insight into both the number of mission-critical narrative reports in their firm, and the potential risks and inefficiencies they can carry for the organization.
In my years of working with companies in many different lines of business, one of the most common initial findings is that senior management are often unaware of the number of important narrative reports produced in an organization. This is due to the fact that these report production can be spread so widely across a firm that managers in one department are not aware of those in other departments. Meanwhile, executives in leadership positions high in the organizational structure—with responsibility over multiple functional areas—tend to be focused on strategic-level concerns and unaware of the risky and inefficient reporting processes in their organizations.
Potential costs of this risk and inefficiency in narrative reporting processes can be significant. For example, these inefficiencies can undermine the accuracy of budgeting and forecasting processes and, in turn, the successful implementation of strategic plans. Perhaps worse, in an era of ever-increasing regulatory requirements in many business sectors, is the potential cost of noncompliance if narrative reports are overlooked or not completed in accordance with current templates and guidelines.
Do your reports work for you...or do you work for your reports?
To illustrate this, I can use the real-world example of a business from one of my earlier blogs on narrative reports—changing names, and a few industry-specific particulars, to protect the firm in question.
We interviewed a senior manager, “Nancy,” who prepared a narrative report requiring data and input from eight different functional areas in her company. However, in the course of interviewing staff in those functional areas, we found they had narrative reports of their own to produce while, at the same time, contributing to Nancy’s.
For example, Nancy received data from human resources (HR) and production. In interviewing HR, we discovered they had a variety of reports they were required to submit to, among other government agencies: the US Department of Labor, State Department of Labor, EEOC and OSHA. In addition, HR had several internal monthly and weekly management reports relating to overtime and open headcount that had to be completed. Meanwhile, the production function (this company had several manufacturing facilities) was required to submit environmental reports to several different state and federal agencies, as well as reports relating to storage and disposal of controlled substances.
We found this pattern replicated across Nancy’s company. Virtually every department/functional area had its own set of narrative reports to complete. These narrative reports could often require input from other areas of the company. For example, the HR OSHA reports required a substantial time commitment from the production area (manufacturing).
In a world of ever-increasing regulatory reporting requirements, the sheer number of these narrative reports represents, for all too many businesses, a Sargasso Sea of inefficiency, risk and a waste of valuable human resources.
Read how recent innovations in advanced reporting, budgeting and planning technology can help you address these inefficiencies in narrative reporting—ensuring better foresight, planning and business performance.